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SA’s largest coal exporters have declared force majeure after Richards Bay Coal Terminal took the step in response to the nationwide lockdown.
Force majeure, French for “superior force”, is a common clause that excuses an entity from fulfilling its contractual obligations in the event of a natural or unavoidable catastrophe.
About 98% of SA’s export coal is sent via the Richards Bay Coal Terminal (RBCT), one of the largest coal export terminals in the world. It is jointly owned by a number of SA coal producers including Exxaro, Sasol Mining, Glencore and Anglo American.
Mzila Mthenjane, executive head of stakeholder affairs for Exxaro, SA’s largest coal producer, confirmed on Sunday that the group had declared force majeure. “Richards Bay Coal Terminal has declared force majeure and the domino effect is, to protect shareholders and suppliers, we also have to declare force majeure to our customers,” he said.
Sasol spokesperson Alex Anderson confirmed that Sasol Mining had declared force majeure and said he understood that all coal exporters have done so. “However, all our mines are running to feed Secunda Synfuels Operations, and [that] includes switching our export mine to feed Secunda Synfuels Operations, and contributing to our stockpile,” he said.
Anglo American Coal SA said it is “reviewing processes and considering how best to manage its force majeure position with its respective counter-parties”.
While non-essential businesses will cease to run during the 21-day lockdown, which is aimed at curbing the spread of the Covid-19 pandemic in SA, mines supplying coal to Eskom have been exempted from its provisions in order to maintain power supply to the country. According to the Minerals Council SA, the local industry annually produces about 250-million tonnes of coal, of which 120million tonnes (48%), is sourced from Eskom-connected mines.
As recently as Friday, Exxaro said it still expected to export some coal, which would aid the government with foreign exchange earnings. Glencore, another supplier of coal to Eskom, said it would also possibly export coal, subject to approval from the department of mineral resources & energy.
On Friday, Exxaro emphasised the importance of coal exports for the state. “The need to minimise the economic impact of the lockdown by continuing with the generation of foreign exchange, will provide the financial capacity for the state to respond to the crisis by continuing, to the extent [that] it is possible, with our coal exports to offshore customers,” the group said.
On Sunday, Mthenjane said exports are not out of the question for the duration of the lockdown but RBCT would have been obliged to declare force majeure while waiting for official approval from its principals and the relevant authorities.